Sales pay plans

[Jim Steele]

In designing a sales pay plan, what is the difference between a "hard" pack and a "commission" pack?

[JustBob]

Jim,

A "hard Pack" is when a dealer via an accounting journal entry adds a certain amount (Ex. $300) to a unit. This entry would incompass a Debit to the unit and a Credit to a reserve account (usually). This reserve is then usually used to write down old or ugly vehicles. The "Hard Pack" actually raises the cost of the unit in vehicle inventory.

A "Commission Pack" also referred to as a "Soft Pack" does not encompass an actual accounting entry or affect the actual inventory value in accounting. It does however increase the cost when figuring a sales person's commission. With any good DMS system the cost seen by the sales force (if allowed) would include the "Commission Pack". Typically it only shows up in accounting as a memo if at all.

Of the dealers I have been into over the years I would guestimate that at least 50% use a hard pack on used units and 80% use a soft pack on used units with some doing both.

I have seen occassional use of hard and soft packs on new but not as common as used. One could argue that new card holdback is a form of a softpack. Typically a sales person is paid on the invoice or pre holdback price and the store profit is calculated by reducing the invoice by the holdback.

I have seen (used) hard and soft packs range from $50 to $500 with the average being in the $250. Although our software allows and will calculate a soft pack based upon a set percentage of I do not recall seeing this done.

Hope you find this helpful.

P.S. I recent years I have seen some dealers going to flat pay plans amd for the most part seem to be happy with them. This is merely an observation on my part however.

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Have a tremendous day
Bob Britting

[This message has been edited by JustBob (edited 04-03-2010).]

[Jim Steele]

Bob

Thank you very much. Exactly what I was looking for.